How resilient are Europe’s supply chains in an age of war, pandemics, and shifting geopolitics?
Our research suggests that while firms are adapting, structural gaps in Europe’s innovation system could undermine long-term competitiveness.
1. Firms adapt supply chains differently in response to shocks
- Firms permanently adapt their transport modes in supply chains in response to climate-related low water levels on inland waterways.
See research paper “Navigating Supply Chain Disruptions: How Firms Respond to Low Water Levels” and press release “Germany’s Low Water Crisis Shows How Climate Shocks Reshape Supply Chains”. - Female-run firms find it harder to enter export markets displaying gender-biases, compared to firms run by male-entrepreneurs.
See research paper “Beyond Borders: Do Gender Norms and Institutions Affect Female Businesses?” and press release “Gender Inequality Abroad Hurts Women Entrepreneurs”. - Around 60% of firms faced disruptions during COVID-19 and the Russia–Ukraine war, leading many to reconfigure supplier networks.
- Firms engaged in joint innovation and information-sharing are more likely to adapt supplier relationships.
- Firms involved in Important Projects of Common European Interest (IPCEIs) are less likely to change suppliers, suggesting deeper, more complex relationships—raising questions for policymakers.
- Joint innovation encourages adding suppliers within existing regions but discourages geographic diversification, creating potential “lock-in” effects.
Upcoming research paper on disruption survey. See news item “Challenges to Global Supply Chains Expected to Rise”.
2. Knowledge and goods flows are deeply interconnected
- In trade between the US and the EU, services trade is almost as large as goods trade. But it is frequently neglected – as for example in the Trump administration’s setting of tariffs for goods trade.
See Policy Brief “Transatlantic Ties beyond Goods Trade: Significance and Policy Implications of EU-U.S. Services Trade”. - Participation in buyer networks boosts firms’ profitability and competitiveness by improving knowledge transfer. Efficient knowledge transmission within networks enhances innovation and product quality.
See research paper “Intermediates Trade and Knowledge Flows” and related news “Knowledge Sharing in Buyer Networks Boosts Firm Profitability”. - Services help firms smooth disruptions in goods trade (e.g., lessons from Brexit).
Upcoming research paper “The impact of shocks on trade in goods and services – Evidence from the Brexit referendum”. - Barriers to services trade affect salaries of CEOs and ordinary workers more than barriers to goods trade
See policy brief “Shocking a CEO: Economic disintegration and executive compensation in manufacturing and services firms”. - There is a strong correlation between knowledge flows and trade in intermediates, showing how trade and innovation policies interact.
See working paper “A Comparison between Traditional and Knowledge Input-Output Tables”. - Innovation and production reinforce each other when co-located. Reshoring without accompanying R&D does not deliver lasting transformation.
See working papers “Knowledge, Jobs, and unemployment in regions” and press release “Innovation Creates Jobs but Can Increase Inequality”.
3. Innovation drives resilience — but Europe faces structural gaps
- Innovation fuels job creation and regional growth, especially when it is broad-based and cross-disciplinary.
See research paper “Multinational Network, Innovation and the Growth of Employment”. - Global innovation remains fragmented, with clear separation between Asian and Western networks — potentially limiting future collaboration and progress.
See research paper “Construction of a Global Knowledge Input-Output Table”. - European universities contribute fewer than 10% of patents, pointing to weak research-to-market transfer.
See research papers “A dataset on knowledge creation and patenting by European Higher Education Institutions (KC-HEI)” and “A dataset on knowledge creation and patenting by European Higher Education Institutions (KC-HEI)” as well as press release “No EU Countries among Top Patenting Universities”. - Innovation is dominated by multinationals, centralizing benefits and weakening local ecosystems.
See research paper “Multinationals Here and There: Affiliates’ Response to Global Crises”. - The loss of top innovators causes lasting knowledge gaps in critical fields. Policy support should prioritize spillover intensity, not firm size.
Upcoming research paper: “Innovation Leaders and the Structure of Knowledge Diffusion”. - Knowledge production increases with subsidies and tax cuts—but primarily in tax havens.
See research papers “A Comparison between Traditional and Knowledge Input Output Tables” and “Construction of a Global Knowledge Input-Output Table”. - Support for green innovation significantly lowers carbon emissions but does not lead to further innovation.
See research papers “A Comparison between Traditional and Knowledge Input Output Tables” and “Construction of a Global Knowledge Input-Output Table”.
For more information, contact:
- Project Lead: Holger Görg
- Project Manager: Sandra Martini
